Investing.com — Here are analysts' biggest trends in the artificial intelligence (AI) space this week.
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Rosenblatt downgrades Google shares amid rising transition risks
Rosenblatt analysts downgraded shares of Alphabet (NASDAQ:) to “Neutral” from “Buy” because “there are multiple areas of transition risk that we recommend pausing for a moment to see how the company responds.”
The investment bank identified several risks for the tech giant, including the impact of AI on search. The introduction of AI Overview could negatively impact search ad revenue. The analyst also pointed to new evidence that it is losing search share to Bing.
Additionally, we expect to see an accelerated shift of search ad revenue to retail media networks as retailers like Walmart (NYSE:) follow Amazon's (NASDAQ:) lead.
Another risk cited by Rosenblatt is Amazon's aggressive move into video advertising, which made ads the default on Prime Video this year and launched a strong pre-sales effort in May, which could impact how YouTube sells its ads.
“We also see a risk that increased competition could force Alphabet to spend more than expected during its AI capital spending cycle,” the analyst added.
Truist on Nvidia: “Number one can also be number one.”
NVIDIA Corporation (NASDAQ:) recently became the top company by market capitalization, but analysts at Truist Securities say the company has the potential to jump from the top to “number one company.”
On June 18, Nvidia's market capitalization reached $3.34 trillion, surpassing Microsoft (NASDAQ:) to become the world's most valuable public company. However, Nvidia's stock price subsequently fell over several sessions, causing it to lose its top spot.
“Even if fundamentals were strong, we believed any share price upside could be limited due to trading and technical challenges associated with NVDA's #1 market cap position,” Truist analysts wrote.
Nonetheless, Truist's analysis suggests that achieving maximum market capitalization is not inherently detrimental to future investment returns.
The firm looked at the investment returns and valuations of the stocks that have maintained the top market capitalizations over the past 26 years, including Microsoft, Cisco (NASDAQ:), Exxon Mobil (NYSE:), Apple, and Amazon.
Their findings showed that most of these stocks underperformed the S&P 500 in the short term — one week, one month and three months — after reaching the top market cap position, but over longer periods of one, three and five years, these stocks generally outperformed the S&P 500, Truist analysts noted.
Rosenblatt upgrades Apple to “buy,” arguing privacy-focused AI will help the company gain market share
Rosenblatt Securities upgraded Apple Inc. (NASDAQ:) shares to Buy this week, noting that the company's privacy-focused “Apple Intelligence” platform could help it gain market share in the AI space.
The decision comes following a survey conducted by Rosenblatt which revealed that privacy is the most important feature US consumers want from AI technology.
The survey, which garnered over 500 responses, used the “MaxDiff” ranking system to rate 15 key features of early smartphone AI. Privacy emerged as the top priority with 17.8% of positive responses, beating the next highest ranked feature, Insight, by 5.6 percentage points.
“Given Apple's unique positioning of private cloud computing as core to its approach, given the recent history of strong ad privacy protections in its own app store and its competitors' AI privacy mishaps, an initial focus on strong privacy seems well positioned to capture brand interest and AI market share,” the analysts wrote.
Rosenblatt also highlighted Apple's strategic focus on specialized large language models (LLMs) and Apple Silicon, which appears to insulate the company from cost pressures that are affecting other tech giants.
Analysts raise Micron price target despite post-earnings selloff
Shares of AI memory chip maker Micron Technology Inc. (NASDAQ:) fell after the company reported its latest quarterly earnings on Wednesday.
Citi analysts attributed the decline to the company's conservative guidance and increased capital expenditures. However, they maintain an optimistic outlook, suggesting that “investors should buy shares in MU's bear market as our DRAM recovery thesis remains unchanged and we expect sequential growth in revenue, EPS and gross margins through C25.”
Reflecting this view, Citi reaffirmed its buy rating on Micron shares with a $175 target price and raised its fiscal 2024 earnings per share (EPS) forecast to $0.66 from $0.52.
Analysts at JPMorgan echoed this sentiment, expressing confidence in Micron's ability to capitalize on the demand for memory content driven by the adoption of AI and accelerated computing servers. The analysts noted that the company's HBM3e capacity is sold out through 2025, with demand starting to pick up in 2026.
“Both HBM3e and eSSD gross margins have had a positive impact on their respective segments, which we believe, combined with cyclical supply and demand related pricing increases, should structurally strengthen the profitability profile,” JPMorgan analysts wrote.
“As the market continues to price in improved revenue, margins and earnings power, we believe the company's shares should continue to outperform through 2024 and 2025.”
JPMorgan reiterated its overweight rating on Micron shares and set a December 2025 price target of $180, highlighting MU as “one of our top picks for next year's semifinals.”
Stifel recommends buying Tesla, sees big potential in AI-based FSD
Earlier this week, analysts at investment bank Stifel initiated research coverage on Tesla Inc. (NASDAQ:), issuing a buy recommendation and a $265.00 price target.
They believe Tesla is well-positioned for significant growth over the next few years, especially between 2025 and 2027. In the short term, an improved Model 3 and the upcoming refresh of the Model Y are expected to boost sales. Additionally, production of the next-generation Model 2 is expected to attract high demand.
“We believe TSLA's AI-based fully self-driving (FSD) initiative has the potential to create significant value through FSD sales, potential licensing agreements, and as a key driver of its longer-term robotaxi initiative,” Stifel analysts wrote.
However, they also highlighted several near-term risks, including delivery levels following disappointing first-quarter 2024 results, challenges with EV adoption, and uncertainties related to the U.S. election.
